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Investors in T. Rowe Price funds do well, but investors in the advisor do even better.

The portfolio managers who work at T. Rowe Price Group(NASDAQ:TROW) make the investment decisions for dozens of highly rated mutual funds, but they never buy the stock of T. Rowe Price Group for their funds. That's because the Investment Company Act, the primary law under which mutual funds operate, prohibits actively managed funds from owning the stock of their advisers.

But the economics of managing money makes the stock of T. Rowe Price Group worthy of a close look from Foolish investors. Nearly $0.25 of every dollar that T. Rowe Price earns in fees from managing mutual funds and other investment accounts flow to the bottom line. That's almost twice the net margin of the average company in the investment services industry and more than twice the net margin of the average company in the broader S&P 500.

The performance of T. Rowe Price Group stands out just as well by other measures. Over the past five years, the company has posted an average return on assets of more than 17% and an average return on investment of nearly 20% -- figures substantially higher than those of both its peers and the broader market. T. Rowe Price Group's return on equity of more than 20% was modestly better than industry and market averages, but it was achieved without employing any debt in the capital structure to juice it higher.

T. Rowe Price Group, with a market capitalization of approximately $9.5 billion, has shown its investors a year-to-date total return of almost 20% and an average return of nearly 18% over the five years ending in 2004. By comparison, the T. Rowe Price Mid-Cap Growth Fund(FUND:RPMGX), which includes such stocks as AmeriTrade(NASDAQ:AMTD), BJ Services(NYSE:BJS), and Motley Fool Hidden Gems pick Fairmont Hotels(NYSE:FHR) in its top holdings, had total returns of nearly 17% and 8.5% over the same periods.

The earnings of T. Rowe Price Group are clearly levered to the markets, but income remained positive throughout the last several years of varying market conditions. And given the firm's solid reputation, which remained untarnished after the recent wave of scandals that affected so many other mutual fund families, there's no reason to expect that investors won't continue to add to their T. Rowe Price fund accounts.

Savvy investors might view T. Rowe Price Group shares as a proxy for rising markets with the downside protection that the company will continue to generate earnings even in the event of a significant market decline.

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Fool contributor Michael Leibert welcomes your feedback. He has no financial position in any of the companies mentioned above.